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Boeing earnings rise despite 787 grounding

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(Globalpost/GlobalPost)

Boeing reported higher first-quarter earnings and reaffirmed its 2013 profit forecast on Wednesday despite the battery problems that grounded the aerospace giant's showcase 787 Dreamliner.

Higher deliveries of other aircraft, including the 777 and 737, offset the freeze on deliveries of the new 787 after the January battery meltdowns on two aircraft already in international service, Boeing said.

Net income for the quarter to march 31 came in at $1.1 billion, up 20 percent from the year-earlier period of $923 million. Profits were boosted by a tax credit for research and development and by lower expenses.

But revenues declined 3 percent to $18.9 billion.

The earnings report comes less than a week after the Federal Aviation Administration approved Boeing's fix to the 787 battery problems, which caused a fire in one aircraft and fumes on another. The aircraft were grounded globally in January.

Staff "worked around the clock to resolve the 787 battery issue," said chief executive Jim McNerney.

"Our first priority in the days ahead is to fully restore our customers' 787 fleets to service and resume production deliveries," McNerney said.

"Our outlook for the year is positive, and our financial and delivery guidance is reaffirmed."

Boeing's earnings were boosted by a $145 million gain, or 19 cents per share, for a 2012 research and development tax credit.

The tax credit and slightly lower expenses helped offset the effects of 2 percent lower operating earnings compared with last year. In terms of costs, Boeing's workforce was 173,100, down 1,300 from the year-earlier period.

"Core earnings", a closely-watched benchmark that excludes pension and post-retirement expenses, came in at $1.73 per share, compared with analyst expectations of $1.48 per share.

Excluding the 19 cents per-share tax credit, core earnings would have been $1.54 per share.

The costs of the 787 grounding were not immediately clear in the quarterly data.

But in an April 21 pre-earnings note, Citigroup said it expects cash costs of $200-$300 million due to the 787 problem. The note said that the company could "smooth out the costs" over a few years through its accounting.

The added costs "might hold back some expected (profit) margin expansion over the next few years," Citi said.

The FAA Friday approved Boeing's fixes to the battery problem, which include replacing the batteries and their charges with modified components and installing a steel enclosure system to contain any overheating.

The FAA plans to stage teams of inspectors at modification locations to check each aircraft before it is returned to service.

On Tuesday, the European Aviation Safety Agency announced its approval of the Boeing battery system modifications.

Japanese regulators said they would make a final decision on allowing the 787 to fly after this week's hearings by the US National Transportation Safety Board.

NTSB chairwoman Debbie Hersman said Tuesday after the first day of testimony that the NTSB still does not know for certain what caused the battery problems in January.

Hersman said it was clear from the hearings that the original testing of the battery -- in which the FAA relief heavily on Boeing itself -- was inadequate. The NTSB hearing concludes Wednesday.

Boeing shares were up 2.0 percent in midday trade.

jmb/pmh

http://www.globalpost.com/dispatch/news/afp/130424/boeing-earnings-rise-despite-787-grounding